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Victor  Talking  MacKine  Company,  Camden,  N.  «J. 


The  American  Review  of  Reviews 


EDITED    BY  ALBERT   SHAW 


CONTENTS    FOR    DECEMBER,     1922 


Greeks  in.  Flight  from  Thrace ....  Frontispiece 

The  Progress  of  the  World — 

The  Christmas  Spirit  Survives 563 

Childhood  as  the  Central  Interest 563 

A  Fairly  Normal  November 564 

The  Great  Game  of  Politics 564 

American  Political  Stability 564 

Party  Changes  of  a  Decade 565 

A  Review  of  Election  Statistics 565 

Democrats  Fighting  Uphill 566 

Weakness  of  the  New  Democracy 566 

'■Reversion  to  Type"'  in  1920 566 

Republicans  on  "Safe  and  Sane"  Ground. .  .  567 

The  Sweeping  \'erdict  Two  Years  Ago 567 

The  Next  Congress  also  Republican ;68 

The  "Ins"  Met  the  Shock  Fairly  Well 568 

Public  ;Men  Come  and  Go 568 

Senate  Elections  in  the  East 569 

Four  New  Democratic  Senators 569 

Some  Southern  Results 570 

Ohio,  Indiana  and  Michigan 570 

Beveridge's  Defeat 571 

Ferris  Wins  in  Michigan 571 

The  "Agrarian"  Victories 571 

Senators  from  the  Farther  West 572 

New  Governors  in  Many  States 572 

Issues  and  Results 573 

The  "Wets"  and  Their  Agitation 574 

A  One-Sided  Battle 574 

Law-breaking  and  Its  Consequences 574 

Private  Conduct  Always  the  Basis 575 

"Dry"  or  "Wet"  Ships? 575 

The  Plight  of  Foreign  Ships 576 

A  High  Tide  of  Smuggling 576 

Laws,  and  Social  Standards 576 

Massachusetts  Rejects  "Movie"  Censorship  576 

New  York  to  Abolish  the  Censors 577 

The  Bonus  Leaders  Are  Encouraged 577 

America  Is  Harmonious  in  Contrast 577 

English  Parties  and  Their  Leaders 577 

The  Fascisti  Success  in  Italy 578 

The  Turkish  Menace 579 

The  Refugees  and  Their  Flight 579 

A  Question  of  Allied  Unity 579 

The  Coal  Commission  at  Work 580 

.\  Permanent  Coal  Commission? 5S0 

Germany's  Coal  Council 580 

Too  Many  Men  Employed 581 

A  Program  for  Saving  Germany 581 

With  portraits,  cartoons,  and  other  ilhis:rations 


;82 


ecord  of  Current  Events 

American  and  British  Politics  in 

Cartoons 5S6 

Investment  Questions  and  Answers. 


Political    Revolutions   at   London   and 

Rome 592 

By  Frank  H.  Simonds 

Leaders  and  Parties  in  Great  Britain. . .   603 

By  p.  W.  Wilson 

With  portraits 

The  Administration  and  the  Merchant 

Marine 609 

By  Edward  Nelson  Dingley 
Failure  of  the  Central  American  Union .   613 

By  Ch.\rles  I'l  Chapman 

With  map  --. 

The  German  Financial  Future 618 

By  J.  Laurence  Laughlin 

Coue:  An  Estimate  and  a  Comparison .   622 

By  Lyman  P.  Powell 

With  portrait 

Physical    Treatment    for    Mental    Dis- 
orders   625 

By  Albert  Shaw 

A  School  for  Public  Service  for  Women.    6j7 

By  Marjorie  Shulkr 

A  Hole  in  the  Hill  in  France   640 

By  Marcus  M.  Marks 

With  illustrations 

Secretary  Lane's  Letters 641 

With  portrait 

Leading  Articles  of  the  Month — 

Should  the  Allied  Debts  Be  Collected? 643 

Lyman  Abbott 645 

Steeds  for  Santa  Claus 646 

Rent  Law  and  Housing  Problem  in  Spain.  .  648 

Italy's  New  Leader 649 

Does  the  Mocker  Mock? 650 

Vv  hy  the  Little  Entente? 651 

The  Work  of  the  Agricultural  P^xplorer 652 

J'ortugal's  Losses  in  the  World  War 653 

Technique  of  the  Safe-Breaker 654 

Influence  of  Ultra- Violet  Rays  on  Eyes  655 

Perfecting  of  International  Organizations.  .  .  657 

Soviet  Russia  and  the  Mohammedan  World.  658 

The  French  in  Tunis 659 

The  French  Occupation  on  the  Rhine  and  in 

the  Saar  Valley 661 

Behind  the  Scenes  of  Life  and  Politics.  ...  663 

Modern  Journey  from  Capetown  to  Cairo .  664 

News  of  Nature's  World 66b 

With  portraits,  cartoons,  and  other  illiistraiions 


The  New  Books 


668 


With  portraits 
Page  6,  advertising  section 


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THE  REVIEW  OF  REVIEWS  CO.,  30  Irving  Place,  New  York 

Pacific  Coast  Office,  327  Van  Nuys  Bldg..  Los  Angeles,  Calif. 
Albert  Shaw,  Pres.     Chas.  D.  Lanier.  Sec.  and  Treas. 


561 


562 


I  303I 


THE  FAILURE  OF  THE  CENTRAL 
AMERICAN  UNION 

BY  CHARLES  E.   CHAPMAN 

(Associate  Professor  of  Hispanic  American  History  in  the  University  of  California) 


RUNNING  from  north  to  south,  between 
.  Mexico  and  Panama,  are  the  five 
republics  of  Guatemala,  Salvador,  Hon- 
duras, Nicaragua,  and  Costa  Rica.  All  but 
Salvador,  which  occupies  a  strip  of  the 
Pacific  coast,  stretch  from  one  ocean  to  the 
other. 

Guatemala  is  the  biggest,  richest,  and 
most  populous  of  the  five,  with  about 
2,000,000  of  the  5,000,000  inhabitants  of 
Central  America;  but  is  a  land  made  up 
largely  of  Indians  living  in  a  condition  of 
peonage  on  the  vast  estates  of  the  coffee 
planters.  Costa  Rica  is  at  the  opposite 
extreme,  with  a  white  population  of  small 
proprietors.  In  all,  there  are  about  400,000 
people  in  this  republic.  The  other  three 
Central  American  republics  are  for  the 
most  part  mestizo  (mixed  Indian  and  white), 
dominated  socially,  politically,  and  eco- 
nomically by  a  white  aristocracy.  Along 
the  Atlantic  coast  the  population  is  negro 
or  negroid,  and  the  language  is  more  often 
English  than  Spanish.  Salvador  is  much 
the  smallest  of  these  states, 
but  ranks  close  to  Guate- 
mala in  population  (about 
a  million  and  a  half)  and 
wealth.  Nicaragua  and 
Honduras  have  each  per- 
haps a  little  more  than 
half  a  million  people.  Cof- 
fee is  the  principal  product 
of  the  countries  on  the 
Pacific  slope,  and  bananas 
on  the  Atlantic,  but  they 
are  enormously  wealthy  in 
other  resources  as  well. 

Six  Attempts  at  Federation 

Almost  a  hundred  years 
before  the  Pilgrim  Fathers 
landed  in  New  England, 
the  Spanish  conquerors 
had  ranged  this  territory 


and  founded  permanent  settlements.  They 
were  grouped  together  in  a  single  gov- 
ernment, presided  over  by  the  /ludiencia 
(a  civil  and  judicial  court)  of  Guatemala 
and  a  captain-general.  In  18 10  the  Span- 
ish American  Wars  of  Independence  be- 
gan. There  was  little  fighting  in  Central 
America,  but  on  September  15,  182 1,  the 
independence  of  the  whole  region  from 
Spain  was  declared.  In  the  following  year 
Central  America  joined  with  the  Mexican 
Empire  of  Iturbide.  On  the  dissolution  of 
that  empire  in  1823,  Central  America  cast 
about  for  a  new  modus  viveitdi,  and  in  1824 
the  first  Federation  of  Central  America  was 
formed.  This  lasted  in  name  until  1840. 
In  1838  Nicaragua  withdrew,  followed 
presently  by  the  other  countries.  Since 
1840  there  have  been  at  least  six  attempts 
to  revive  the  union,  all  resulting  in  failure. 
The  most  recent  of  these  has  just  come  to 
the  usual  end. 

Considered  as  an  ideal  there  can  be  no 
objection    to    the    unification    of    the   five 


^^A.       OCi 


THE   FIVE   REPUBLICS   OF    CENTRAL   AMERICA- 
FROM   MEXICO  TO  PANAMA 


-EXTENDING 


613 


6i4 


THE  AMERICAN  REVIEW  OF  REVIEWS 


republics  of  Central  America  into  one. 
Tradition  favors  it.  An  overwhelming 
majority  opinion  in  Central  America,  irre- 
spective of  party,  in  a  general  way  desires 
it.  As  one  country,  Central  America  could 
attain  to  a  position  in  world  affairs  that  no 
one  of  the  five  can  ever  have.  Then  why 
not  unite?  Or  why  didn't  they  stay  united 
on  some  one  of  the  various  occasions  when 
they  have  joined  together? 

Attitude  of  the  United  States 

There  are  certain  radical-minded  Central 
Americans  who  cast  the  blame  upon  the 
United  States,  holding  that  our  Govern- 
ment keeps  them  divided  in  order  to  manage 
them  the  more  easily.  This  view,  which 
flies  directly  in  the  face  of  history,  was 
recently  advanced  to  the  writer  by  a  young 
man  who  had  spent  the  past  five  years  as  a 
student  in  California. 

"You  have  been  in  the  United  States  a 
long  time,"  I  said  to  him.  "Do  you  seri- 
ously believe  that  the  United  States  would 
have  any  trouble  in  dominating  the  whole  of 
a  united  Central  America  if  she  wanted  to?" 

He  thought  a  moment,  and  then  an- 
swered frankly:  "You  are  right!  Cali- 
fornia could  do  it  alone." 

It  is  time  to  lay  this  silly  ghost  of  an 
eighteenth  century  "divide  and  rule" 
policy  of  the  United  States  in  Central 
America.  Nothing  but  good  for  this  coun- 
try could  come  from  a  successful  union  of 
the  five  states.  Without  exception,  our 
Government  has  always  expressed  its  readi- 
ness to  see  the  union  consummated,  when- 
ever the  Central  Americans  could  accom- 
plish it  among  themselves.  When  the 
recent  federation  was  broached,  Dr.  Leo  S. 
Rowe,  Director  of  the  Pan-American  Union, 
said:  "It  would  be  indefensible  for  the 
United  States  to  oppose  such  a  union." 
Secretary  of  State  Hughes  put  our  Govern- 
ment definitely  on  record  when  he  stated  to 
Doctor  Zepeda  (Nicaraguan  Minister  of 
Foreign  Affairs)  on  June  2,  1921,  that  the 
United  States  approved  the  formation  of  a 
Central  American  Union,  provided  it  were 
in  accordance  with  the  spontaneous  wish 
and  desire  of  the  different  countries  and 
their  citizens.  Mr.  Hughes  added  that 
recognition  would  depend  upon  the  pros- 
pects of  success  the  union  should  have, 
after  it  had  been  formed.  These  remarks 
of  Mr.  Rowe  and  Mr.  Hughes  should  be 
taken  as  indicative  of  the  general  policy  of 
the  United  States.     The  successful  attain- 


ment of  a  Union  of  Central  America  is  a 
matter  that  is  wholly  in  the  hands  of  the 
Central  Americans  themselves. 

Arguments,  For  and  Against 

Tradition  is  perhaps  the  strongest  factor 
in  the  desire  of  the  Central  American  coun- 
tries for  a  union.  In  addition,  they  have 
similar  problems  as  respects  their  resources 
and  need  for  development;  their  leading 
political  parties  are  usually  "Liberals"  and 
"Conservatives,"  \vith  similar  (if  some- 
what shadowy)  principles  in  each  country; 
frequency  of  revolutions  (organized  usually 
across  the  borders  of  a  neighboring  state) 
and  of  exile  has  made  the  leading  families 
acquainted  with  one  another,  and  has 
brought  about  much  intermarriage;  and 
there  is  also  the  (at  least  theoretical)  possi- 
bility of  a  saving  in  administrative  and 
miUtary  expenses  through  the  substitution 
of  one  government  for  live. 

But  there  are  also  arguments  against 
forming  a  union  which  at  present  far  out- 
weigh those  in  its  favor.  They  may  be 
summed  up  as  follows:  real  patriotism,  of 
the  sort  that  puts  country  above  self,  is 
rare  in  Central  America.  A  saving  in 
jobs  and  expenditures  is  not  desired  by  the 
unduly  large  official  class,  which  has  hard 
enough  time  as  it  is  to  eke  out  an  existence; 
indeed,  lack  of  jobs  is  an  all  too  prolific 
cause  of  revolution.  The  different  coun- 
tries, different  parties,  and  different  indi- 
viduals within  the  same  country,  party,  and 
town  are  filled  either  with  jealousy  or  mis- 
trust of  one  another.  Political  morality 
and  political  methods  have  not  yet  reached 
a  stage  where  the  inhabitants  are  willing  to 
abide  by  a  decision  that  is  adverse  to  them. 
And  communications  are  so  scantily  de- 
veloped and  the  resources  of  governments 
so  slight  that  revolution,  even  when  unsuc- 
cessful, is  easy  and  fairly  safe.  For  these 
reasons  it  is  always  necessary  to  investigate 
the  specific  problems  of  each  attempt  at 
union,  looking  behind  high-sounding  pro- 
grams. 

It  will  be  found  that  Costa  Rica  has 
been  the  most  persistently  opposed  to  a 
union,  in  which  it  could  have  slight  weigljt 
owing  to  its  comparatively  small  popula- 
tion. Furthermore,  with  a  population 
that  is  largely  white  and  with  a  record  for 
good  government  and  freedom  from  revolu- 
tion that  ranks  with  the  best  in  Hispanic 
America,  Costa  Rica  is  somewhat  skeptical 
of  becoming  involved  in  the  maelstrom  of 


THE  FAILURE  OF   THE  CENTRAL  AMERICAN   UNION 


615 


Central  American  politics.  Guatemala  has 
usually  opposed  the  union,  but  for  an 
opposite  reason,  being  unwilling  to  accept 
an  equal  ranking  with  the  other  less  wealthy 
and  less  populous  states.  And  yet  it  was 
Rufino  Barrios,  a  Guatemalan,  who  stood 
forth  as  the  great  apostle  of  the  union  in 
recent  times.  In  1885  he  tried  to  establish 
it  by  force,  but  met  with  defeat  and  death 
at  the  hands  of  a  Salvadorean  army.  The 
iniquitous  Nicaraguan  dictator,  Zelaya, 
also  tried  to  bring  about  union  by  force,  in 
1907,  dreaming  even  of  a  vast  empire  under 
his  rule  that  should  stretch  into  South 
America;  but  he  was  unable  to  accomplish 
his  design. 

Opposition  to  Our  Treaty  with  Nicaragua 

With  the  approach  of  the  one-hundredth 
anniversary  of  Central  American  inde- 
pendence (September  15,  1921),  a  number 
of  ardent  pro-unionists  began  to  suggest 
the  idea  of  a  revival  of  the  federation.  An 
invitation  to  the  other  Governments  was 
formally  issued  by  the  Republic  of  Salvador 
in  December,  1920,  and  delegates  from  all 
five  states  met  at  San  Jose,  the  capital  of 
Costa  Rica.  By  that  time  the  forces  of 
particularism  had  gotten  in  their  work, 
and  the  specific  issue  of  the  conference  at 
once  manifested  itself.  This  was  the  op- 
position of  the  other  four  republics  to  the 
relations  of  Nicaragua  with  the  United 
States,  and  especially  to  the  Chamorro- 
Bryan  Treaty  of  1914.  In  that  treaty  the 
United  States  acquired  an  option,  for 
ninety-nine  years,  to  build  a  canal  through 
Nicaragua,  receiving  also  rights  to  estab- 
lish naval  bases  on  Great  Corn  Island  off 
the  Atlantic  coast  of  Nicaragua  and  in  the 
Gulf  of  Fonseca  on  the  Pacific,  in  case  the 
canal  should  be  built.  The  consideration 
paid  was  $3,000,000. 

The  Central  American  countries,  other 
than  Nicaragua,  have  bitterly  opposed  this 
treaty,  despite  the  assurance  of  the  United 
States  Government  that  it  did  not  propose 
to  take  any  action  that  should  violate  the 
sovereignty  of  the  four  complaining  states. 
The  most  vociferously  announced  objection 
is  that  the  treaty  does  infringe  the  specific 
rights  of  three  of  the  four  republics  and  the 
general  rights  of  all.  Costa  Rica  claims 
that  Nicaragua  went  back  on  a  promise  to 
share  with  her  the  benefits  that  might  come 
from  the  building  of  a  canal.  Furthermore, 
though  it  would  be  possible  to  have  it  en- 
tirely in  Nicaragua,  the  San  Juan  River 


(which  it  is  proposed  to  utilize)  has  changed 
its  course  so  that  its  principal  mouth  is 
now  in  Costa  Rican  territory.  Salvador 
and  Honduras  claim  that  the  Gulf  of  Fon- 
seca belongs  jointly  to  them  and  Nicaragua. 
And  Guatemala  gets  in,  because  the  idea  of 
the  union  has  never  died,  even  though  the 
states  have  separated;  therefore,  any  spe- 
cial advantage  accruing  to  one,  it  is  claimed, 
ought  to  be  shared  by  aU. 

Back  of  these  openly  announced  argu- 
ments there  were  almost  certainly  the  more 
sordid  motives  of  jealousy  over  the  profit 
Nicaragua  had  made  out  of  the  canal 
treaty,  desire  to  share  in  that  and  in  any- 
thing else  Nicaragua  might  get  out  of  the 
construction  of  a  canal,  and  anti-Ameri- 
canism. There  seems  to  be  no  doubt  but 
that  the  union  movement  was  due  in  part 
to  Mexican  propaganda,  started  in  Car- 
ranza's  time,  against  the  United  States. 
One  gets  this  information  on  all  sides. 
The  motive  in  this  Mexican  activity  seems 
to  have  been  a  belief  that  the  union  would 
be  a  valuable  ally  of  Mexico  against  the 
United  States. 

Nicaragua's  Side  of  the  Controversy 

Nicaragua  has  been  blamed  by  the  other 
countries  for  the  failure  of  the  union,  on 
the  ground  that  she  would  not  consent 
to  a  denunciation  of  the  Chamorro-Bryan 
Treaty,  or  at  least  to  a  fresh  negotiation 
with  the  United  States  with  a  view  to  its 
derogation.  It  is  therefore  no  more  than 
just  to  set  forth  Nicaragua's  defense,  in 
some  detail. 

In  the  early  discussions  of  the  congress 
it  was  agreed  that  the  new  state  of  Central 
America  should  fulfil  the  treaties  made 
with  foreign  powers  by  each  one  of  the  five. 
Thereupon,  Manuel  Pasos,  one  of  the 
two  Nicaraguan  delegates,  asked  that 
special  mention  be  made  of  the  Chamorro- 
Bryan  Treaty,  Despite  pleasant-sounding 
speeches,  it  was  clear  that  the  other  dele- 
gates would  not  consent,  and  presently 
they  reached  the  point  of  denying  the 
validity  of  the  treaty.  Senor  Pasos,  by 
this  time  the  only  remaining  delegate  from 
Nicaragua,  was  willing  to  stand  upon  it 
merely  as  a  reservation  of  Nicaragua,  with- 
out binding  the  other  states  to  recognize  it. 
This  was  acceptable  to  them  in  so  far  as  it 
did  not  infringe  "existing  rights"  of  other 
states — which  it  was  perfectly  clear  that 
the  majority  of  the  delegates  interpreted 
to  mean  that  the  treaty  was  not,  and  never 


6i6 


THE  AMERICAN  REVIEW  OF  REVIEWS 


had  been,  valid  because  it  did  infringe 
"existing  rights,"  basing  their  view  on  two 
decisions  of  the  now  defunct  Central  Ameri- 
can Court  of  Justice,  decisions  against 
which  Nicaragua  protested  at  the  time  and 
ever  since.  Senor  Pasos  then  tried  to  have 
the  sessions  suspended,  to  be  resumed 
later  at  Managua,  the  capital  of  Nicaragua, 
but  nothing  came  of  the  suggestion.  The 
situation  had  now  reached  a  deadlock;  so 
Senor  Pasos  left  the  conference,  early  in 
January,  192 1.  The  remaining  delegates 
proceeded  to  sign  a  pact  of  union  for  sub- 
mission to  their  respective  governments. 

It  was  not  until  later  in  the  year  192 1 
that  the  project  received  much  attention  in 
Washington.  A  meeting  of  a  "Nicaragua 
Group  Committee"  was  held  on  June  13, 
1921,  at  the  suggestion  of  Dr.  Leo  S.  Rowe, 
which  developed  opinions  that  were  pres- 
ently embodied  in  a  formal  report,  dated 
June  28.  Referring  to  the  advantages  of 
Nicaragua's  association  since  191 2  with  the 
United  States  Government  and  the  Ameri- 
can bankers,  the  report  went  on  to  say: 

The  Government  of  Nicaragua  feels  it  would  be 
disloyal  to  the  people  of  Nicaragua  if  it  were  to 
sacrifice  those  advantages  by  joining  unconditionally 
any  union  with  other  states  less  fortunately  situated. 
It  recognizes  nevertheless  that  there  are  certain 
important  factors  which  lead  it  to  the  conclusion 
that  if  the  interest  of  Nicaragua  can  be  fully 
guarded,  it  might  well  be  found  advisable  to  enter 
such  a  union.  ...  In  consequence,  it  will  doubtless 
be  very  glad  to  take  up  for  serious  consideration 
the  question  of  its  entrance  into  the  union,  provided 
it  can  receive  assurance  that  the  other  members 
of  the  federation  will  be  able  and  willing  to  put 
themselves  politically  and  financially  into  the  con- 
dition, either  before  entering  the  union  or  through 
pUns  adopted  in  the  formation  of  the  union,  which 
will  enable  all  parties  to  enter  the  union  on  such 
terms  that  the  interests  of  each  shall  be  carefully 
guarded  and  there  shall  be  no  undue  sacrifice  re- 
quired of  any  one  member. 

After  making  a  specific  recital  of  the 
achievements  of  Nicaragua  since  191 2 — 
substantially  as  set  forth  by  the  present 
writer  in  his  article  published  in  the  October 
number  of  the  Review  of  Reviews — the 
report  concluded  with  a  statement  of  re- 
sults to  which  the  other  four  countries 
should  attain,  before  Nicaragua  could  con- 
sent to  enter  a  union.  In  the  words  of  the 
report,  these  results  should  be  the  following: 

(a)  A  sound  monetary  system  for  the  union  or 
such  a  reorganization  of  the  monetary  system  of  the 
republics  that  they  will  work  harmoniously  with  that 
of  Nicaragua. 

(b)  A  satisfactory  arrangement  of  their  foreign 
debts. 

(c)  A  consolidation  of  their  internal  debts. 


(d)  A  standardization  of  customs  tariffs,  internal 
revenue  fiscal  systems,  means  of  communication 
(post-offices  and  telegraphs),  harbors  and  ports, 
coastwise  steamship  service,  and  such  changes 
in  their  political  government  as  may  be  necessary 
to  make  a  homogeneous  governmental  entity. 

It  should  also  be  clearly  understood,  of  course, 
that  the  present  contracts  entered  into  by  the 
Republic,  either  in  the  form  of  treaties  or  contracts 
with  private  indi\aduals,  should  be  religiously  and 
scrupulously  carried  out,  backed  by  the  whole 
confederation,  but  with  Nicaragua  primarily  re- 
sponsible. 

Still  more  representative  of  the  official 
opinion  of  Nicaragua  are  the  words  of 
President  Diego  Chamorro.  In  his  inaugural 
address  of  January  i,  1921,  he  referred  to 
the  conference  which  was  then  going  on  at 
San  Jose,  saying:  "From  the  beginning 
there  has  been  observed  the  well-defined 
tendency  among  certain  political  elements 
to  take  the  idea  of  union  as  a  weapon  of 
local  partisanship."  He  then  alluded  to  the 
attempts  to  invalidate  Nicaragua's  treaty 
with  the  United  States,  and  concluded, 
saying  that  his  Government  would  still  put 
forth  its  efiforts  "so  that  the  centenary  of 
our  independence  may  find  us  reunited 
under  a  single  flag  and  forming  a  single 
political  entity." 

A  year  later,  in  December,  192 1,  President 
Chamorro  issued  his  first  annual  message, 
nearly  half  of  which  was  devoted  to  a  recital 
of  Nicaragua's  relation  to  the  project  of 
union.  His  account  of  the  proceedings  at 
San  Jose  agreed  with  that  of  the  official 
volume  of  the  conference,  which  has  been 
followed  in  the  summary  given  here,  but 
went  on  to  tell  of  the  "  repeated  attempts  at 
subversion  of  the  public  order"  since  the 
refusal  of  the  Nicaraguan  delegates  to  sign 
the  pact,  all  done  "in  the  name  of  and 
under  the  pretext  of  the  federation." 

The  Latest  Attempt  at  Union 

Throughout  the  other  countries  of  Cen- 
tral America  the  press  openly  advocated 
employment  of  force  to  overthrow  the  ex- 
isting government  of  Nicaragua,  in  order  to 
bring  that  state  into  the  union,  and  many 
Nicaraguan  Liberals  did  all  they  could  to 
stir  up  a  revolution.  Meanwhile  the  three 
northern  states  had  accepted  the  compact  ' 
of  union,  and  had  arranged  for  a  meeting  at 
Tegucigalpa,  the  capital  of  Honduras,  of  a 
Constituting  Assembly,  to  put  the  new 
union  on  a  working  basis.  Forming  them- 
selves into  a  so-called  "  Federalist  League," 
certain  Nicaraguan  Liberals  selected  dele- 
gates to  attend  the  meeting  in  Honduras, 


THE  FAILURE  OF   THE  CENTRAL  AMERICAN   UNION 


617 


which  began  on  July  20,  192 1.  The  pro- 
posal was  made  to  receive  them  as  the  for- 
mally constituted  representatives  of  Nica- 
ragua, and  this  was  done  by  the  Assembly, 
although  the  Federal  Council  had  pre- 
viously refused  to  acknowledge  them.  The 
president  of  the  Assembly  went  so  far  as  to 
say  that  negotiations  might  be  opened  with 
the  United  States  to  bring  Nicaragua  into 
the  union,  but  it  would  not  be  necessary 
to  treat  with  the  government  of  Nicaragua. 

Outside  of  the  sessions  of  the  Assembly, 
the  advisability  of  stirring  up  a  revolution 
in  Nicaragua  was  freely  discussed,  and  news- 
papers in  the  different  states  quite  as  freely 
predicted  civil  war  and  the  overthrow  of 
the  government  in  Nicaragua.  Finally,  on 
August  2 1 ,  a  body  of  men  crossed  over  from 
Honduras  into  Nicaragua,  and  raised  the 
standard  of  revolt.  They  were  easily  driven 
out,  but  later  there  were  other  similar 
invasions.  No  further  attempts  were  made 
after  October,  192 1,  but  the  air  has  been 
filled  with  tales  of  plotting  ever  since. 

During  the  conference  of  San  Jose  the 
Costa  Rican  delegates  and  press  had  been 
enthusiastic  for  union.  The  Minister  of 
Foreign  Relations,  as  president  of  the  con- 
ference, even  went  so  far  as  to  denounce 
Nicaragua  for  putting  ahead  of  the  union 
"  the  faith  of  its  plighted  word,  as  the  party 
which  is  at  present  in  power  understands 
it."  And  yet,  on  June  22,  1921,  the  Costa 
Rican  Congress  rejected  the  pact  of  union. 
Many  reasons  have  been  assigned  for  this 
action,  but  the  one  which  underUes  them 
all  was  the  failure  of  Nicaragua  to  come  in. 
With  Nicaragua  in  the  union,  Costa  Rica 
might  hope  to  force  her  own  interpretation 
of  the  canal  treaties  upon  her  northern 
neighbor;  without  Nicaragua,  the  tradi- 
tional objections  of  Costa  Rica  to  the  union 
far  outweighed  all  other  considerations. 

Guatemala,  Salvador,  and  Honduras 
ratified  the  pact,  but  it  was  evident  from 
the  first  that  the  failure  to  get  Nicaragua 
in  had  killed  the  union.  Late  in  192 1  there 
was  a  successful  revolution  in  Guatemala. 
The  new  government  of  President  Orellana 
favored  the  union  in  principle,  but  not  the 
one  that  had  been  worked  out.  So  it  for- 
mally withdrew.  In  Salvador,  enthusiasm  for 
the  union  was  decidedly  on  the  wane  from 
the  moment  it  was  clear  that  Nicaragua 
could  not  be  brought  in.  The  position  of 
Salvador  somewhat  resembled  that  of  Costa 
Rica;  no  formal  action  was  taken,  but  the 
union  now  ceased  to  function  as  respects 


Salvador.  Left  alone,  Honduras — which 
some  say  was  the  only  sincere  proponent  of 
union — could  do  nothing. 

Secretary  Hughes  Calls  a  Meeting  at 
Washington 

As  this  article  goes  to  press,  arrange- 
ments are  being  made  for  a  meeting  of 
delegates  from  the  Central  American  coun- 
tries to  be  held  in  Washington.  As  an- 
nounced in  the  newspapers,  a  discussion 
of  the  various  problems  of  the  five  republics 
is  contemplated,  with  the  proviso  that  the 
consent  of  each  delegation  must  be  ob- 
tained before  any  specific  matter  may  be 
considered.  Almost  certainly  a  revival 
of  the  project  of  union  will  be  suggested, 
but  assuredly  Nicaragua  will  interpose 
a  veto  unless  the  questions  her  delegates 
raised  at  San  Jose  are  first  settled  to  her 
satisfaction.  But  if  it  were  conceivable 
that  such  a  result  might  be  attained,  then 
it  would  be  more  than  probable  that  some 
of  the  other  republics  would  veto  the  issue 
of  union.  In  any  event,  whatever  pro- 
nouncements may  be  made  at  Washington 
in  favor  of  union,  it  is  better  to  reserve  judg- 
ment until  the  events  of  the  next  few  years 
shall  provide  an  answer. 

Will  there  ever  be  a  Union  of  Central 
America?  Possibly — but  there  are  a  number 
of  "conditions  precedent."  There  must  be 
a  considerable  betterment  in  the  means  of 
communication.  The  finances  of  the  other 
four  republics  must  be  put  upon  something 
approaching  the  soundness  of  the  Nicara- 
guan  system.  These  matters  might  profit- 
ably be  taken  up  at  Washington. 

And,  most  important  of  all,  there  must 
be  an  inculcation  of  real  patriotism,  over 
and  above  local  and  individual  aspirations 
c#*Jealousies,  such  that  one  President,  one 
Congress,  one  capital,  one  army,  and,  in  fine, 
a  single  government  will  be  accepted  by  all. 
Even  the  recent  union  did  not  attempt  to  go 
as  far  as  that.  Instead  of  having  one  Presi- 
dent, replacing  five,  it  was  proposed  to  have 
an  executive  of  ten  persons — a  representative 
and  substitute  from  each  of  the  states.  Sal- 
vador, Honduras,  and  Nicaragua  have  the 
best  chance  of  forming  a  union  that  will  last, 
as  racially  and  geographically  they  are  most 
nearly  alike.  Guatemala  might  remain  in, 
but  there  is  some  question  in  her  case. 
Costa  Rica  is  not  likely  to  be  appealed  to  by 
the  idea  of  union  in  itself.  Only  if  it  is 
distinctly  and  continuously  to  her  advan- 
tage will  she  enter  a  union  and  stay. 


THE  GERMAN  FINANCIAL 

FUTURE 

BY  J.  LAURENCE  LAUGHLIN 


GERMANY  has  followed  the  mad 
course  of  so  many  other  countries  in 
excessive  issues  of  inconvertible  paper 
money  that  we  are  not  without  evidence  in 
abundance  on  which  to  base  reasonable 
estimates  as  to  what  must  inevitably  follow 
the  break-down  of  her  monetary'  system. 
The  strange  thing  is  that  the  disasters  into 
which  unrestrained  leaders  have  precip- 
itated their  peoples  by  monetary  errors 
and  whose  records  have  been  writ  large  in 
financial  history,  should  not  have  served 
as  warnings  to  prevent  Germany  from 
stupidly  copying  the  same  futile  policies. 
She  has  always  prided  herself  on  gathering 
facts  in  recondite  fields  of  knowledge,  even 
though  her  scholarship  has  often  been 
vitiated  and  lost  effectiveness  by  a  too 
common  disposition  to  speculate  and  offer 
visionar}'  theories  which  have  the  attrac- 
tion of  novelty  or  audacity. 

It  is  accordingly  difficult  to  believe  that 
Germany  did  not  know  better.  If  so,  she 
has  been  consciously  dishonest  for  a  po- 
litical purpose;  if  not,  then  her  leaders  have 
been  inconceivably  incompetent.  If  she 
expected  disasters  to  follow  her  mad  mone- 
tary policy,  then  it  was  stupid  in  her  to 
think  that  by  such  serious,  self-inflicted 
wounds  she  could  so  excite  compassionTTs 
to  bring  about  a  reduction  in  the  burden  of 
reparations.  The  Allies,  and  the  rest  of  the 
world,  were  not  likely  to  be  so  simple- 
minded  as  to  be  thus  deceived. 

^  II 

A  distinction  should  be  made  between  a 
financial  and  a  monetary  collapse.  The 
former  has  to  do  with  income  and  outgo  in 
a  fiscal  sense;  while  the  latter  concerns  the 
means  of  payment,  the  standard  in  which 
all  prices,  quotations  of  securities,  wages, 
freights,  rents  and  contracts  are  made. 
The  latter,  of  course,  must  react  on  the 
former,  and  make  all  matters  of  value  and 

6i8 


exchange  variable,  difficult  and  confusing! 
The  immediate  question  in  Germany  ha{ 
to  do  with  the  monetary  fiasco.  The  error| 
which  have  brought  the  mark  to  practicaj 
worthlessness  are  based  upon  hoary  ok 
fallacies,  always  known  to  work  distress. 

The  pivotal  folly,  of  course,  is  the  mental 
confusion  between  the  fiscal  and  the  monel 
tary  functions  of  the  treasury",  (i)  On  thi 
one  hand,  the  state  by  taxation  or  loanj 
engages  to  provide  the  means  for  covering 
the  normal  budget  of  peace  or  the  extraorl 
dinary  expenditures  of  war;  (2)  on  th( 
other  hand,  the  state  b)-  a  duly  considerec 
monetary  and  credit  system  aims  to  pro! 
vide  an  effective  means  by  which  goods  of 
income  and  outgo  can  be  priced  in  a  stabU 
standard  and  readily  exchanged  by  formj 
of  money,  bills,  notes  and  credit  to  th< 
greater  convenience  of  production  and  trade 
and  payment  of  taxes.  Germany  has  com] 
mitted  the  one  fatal  error  of  disregarding 
all  experience  and  borrowing  for  fiscal  purj 
poses  through  the  issue  of  irredeemable 
paper  money. 

The  plea  of  necessity  is  quite  aside  froi 
the  point.  To  create  a  forced  loan  by 
demand  debt  is  itself  an  acknowledgment 
of  financial  distress  and  immediately  lowers 
the  credit  of  the  state.  The  display  01 
financial  incompetence,  by  which  7000  o^ 
the  paper  marks  can  now  be  bought  for  one 
dollar,  can  have  no  other  effect  than  to 
damage  her  credit  as  to  make  it  practicall) 
impossible  for  her  to  float  a  foreign,  if  no^ 
also  a  domestic,  loan.  By  hopelesslj 
mixing  up  fiscal  with  monetary  operation^ 
Germany  through  repeated  issues  of  billion^ 
of  paper  every  week  has  advertised  to  tht 
world  that  she  is  unable  to  raise  funds  foil 
fiscal  purposes  in  legitimate  ways.  For  an\j 
passable  financial  existence  in  the  futurej 
Germany's  policy  must  be  founded  on  aij 
unalterable  determination  to  separate  enn 
tirely  her  monetary  from  her  fiscal  dealings] 
Such  are  the  principles  to  which  her  financetj 
must  sooner  or  later  conform,  whatever  heij 
political  struggles. 


Lithomount 

Pamphlet 

Bindef 

Gaylord  Bros. 

Makers 

Stockton,  Calif. 

PAT.  IAN  21,  1908 


•J-.*.-     ■        *     HA.,, 


-b 


M<..j. 


{      ^ 


^-\ 


